South Korea Proposes "3·4·5 Vision"; Academia: Over-reliance on Semiconductors Poses Risks

On Tuesday, the South Korean government released the "Economic Growth Strategy for the Second Half of 2026", setting the "3·4·5 Vision" of achieving a potential economic growth rate of 3%, ranking among the top four global exporters, and reaching a per capita national income (GNI) of 50,000 US dollars. It also significantly raised the forecast for this year's economic growth rate from 2.0% to 3.0%, hoping to drive economic growth through the semiconductor boom and the artificial intelligence (AI) industry to achieve a new round of leap forward.

However, the academic community in South Korea believes that this round of growth was mainly driven by the semiconductor export cycle. Employment and domestic demand improvements were limited, and the pressure on people's livelihoods such as high prices would still be difficult to alleviate in the short term. The government's proposed high growth target faces considerable challenges.

On Tuesday (July 14th), South Korean President Lee Jae-yong presided over the State Council meeting at the Blue House and stated that the achievements made in the second half of this year will determine the development of South Korea over the next 30 years. He demanded that the government make every effort to stabilize prices and the real estate market, accelerate the cultivation of "super-differentiated and super-innovative" industries, increase the potential growth rate, and emphasized that the real estate policy "is not about discussion, but about decision-making".

According to the latest forecast, the actual growth rate of South Korea's gross domestic product (GDP) this year will increase from 2.0% to 3.0%. If achieved, it will mark the fastest growth rate since 2021. The nominal GDP growth rate will rise from 4.9% to 12.3%, potentially reaching a new high since 1996, mainly driven by the increase in semiconductor prices, improved exports, and increased corporate profits.

The South Korean government also predicts that this year's current account surplus will reach 290 billion US dollars, setting a new record high. The per capita national income will approach 40,000 US dollars, and the proportion of national debt to GDP will drop to 47%.

However, the stimulating effect of economic growth on people's livelihood remains limited. The government has lowered its forecast for the number of new jobs this year from 160,000 to 150,000, while raising its forecast for consumer price increases from 2.1% to 2.6%, reflecting the weak recovery of the job market and the continued persistence of high price pressures.

Regarding the "3·4·5 Vision", the market and academia generally adopt a cautious attitude. The Bank of Korea estimates that the potential economic growth rate of South Korea from 2024 to 2026 will be approximately 2%, and the per capita national income in 2025 will be around 36,963 US dollars, still leaving a gap of about 35% from the target of 50,000 US dollars. Although South Korea's export volume rose to the fifth place globally in the first four months of this year, whether it can rank among the top four globally in the entire year is still affected by factors such as exchange rate fluctuations, semiconductor market conditions, and the export performance of major competitors.

Professor Hyun Jun-yeong from the Economics Department of Kyunggi University in South Korea pointed out that this year's economic growth was almost entirely driven by the semiconductor industry. The manufacturing sector as a whole did not simultaneously create more jobs, so the growth benefits were difficult to be widely shared among the public.

Experts believe that the 3% economic growth this year is more indicative of the recovery in the semiconductor boom cycle, and does not mean that South Korea's potential economic growth rate has risen to 3%. To avoid repeating the failure of the Lee Myung-bak government's "7·4·7 Vision" (an average annual economic growth rate of 7%, becoming the world's fourth-largest economy, and achieving a per capita national income of $40,000) in the end, the government, in addition to fostering new growth engines such as semiconductors and AI, also needs to come up with specific plans to promote employment, expand investment, and enhance productivity, and reserve a "B plan" for the potential downturn in the semiconductor industry.